NSW Court Decision Escalates Liability Risks for Construction Industry

The DBP Act, which came into effect on 1 July 2025, introduced a statutory duty of care that is non-delegable, retrospective, and applies to all buildings and participants involved in their construction, including individual employees and directors. This means that developers and builders are now fully responsible for any defects, regardless of whether subcontractors or other parties were involved.

The significance of this ruling lies in its clarification that breaches of the DBP Act's statutory duty create a vicarious-like liability. Consequently, builders and developers are accountable for the entire cost of rectifying defects, even if they were caused by subcontractors. This places the onus on them to pursue separate claims against subcontractors to recover costs.

Given these changes, it is advisable for construction companies and professionals to reassess their professional indemnity (PI) insurance to ensure it adequately covers the increased risks. Additionally, the industry must be prepared to strategically manage complex multi-party litigation, including cross-claims, to allocate remediation costs appropriately among responsible parties.

For small business owners, tradies, sole traders, event organisers, and contractors operating in the construction sector, this development underscores the importance of understanding the evolving legal landscape and ensuring that their insurance coverage is comprehensive and up-to-date. Engaging with insurance brokers or legal advisors can provide valuable insights into managing these heightened risks effectively.